Answer:
A) Shortage
Step-by-step explanation:
A price ceiling is a government-imposed maximum price that can be charged for a good or service. When the price ceiling is set below the equilibrium price (the price at which quantity demanded equals quantity supplied), it creates an artificial shortage in the market.
Here's how it works:
1. The price ceiling restricts the price that sellers can charge for the product. As a result, the price is set below the equilibrium price.
2. At the lower price, quantity demanded increases because consumers are willing to buy more of the product at the lower price.
3. However, quantity supplied decreases because sellers are not willing to produce and sell as much at the lower price since it may not cover their costs or provide enough profit.
4. The difference between quantity demanded and quantity supplied is the shortage. This means that there is more demand for the product than there is supply available at the price ceiling.
The shortage created by the binding price ceiling can lead to various negative consequences such as black markets, increased competition among consumers, and inefficient allocation of resources.